IP Law Daily, TRADEMARK NEWS: Real estate developer petitions Supreme Court over inclusion of affiliates’ profits in $43 million disgorgement award, (Feb 23, 2024)

By Kevin M. Finson, J.D.

The petition alleges that the Fourth Circuit ignored existing case law by including profits of the developer’s non-party affiliates in a disgorgement order based on the developer’s infringement of a competitor’s trademark.

A real estate developer has filed a petition for certiorari with the United States Supreme Court in its dispute with a competing real estate development firm over damages for its use of the mark DEWBERRY in violation of a prior settlement agreement. The petitioner alleges that the Fourth Circuit erred in affirming the district court’s order awarding a disgorgement of profits calculated to include profits earned by its affiliated business entities. The case is Dewberry Group, Inc. v. Dewberry Engineers, Inc., Dkt. No. 23-900.

Both parties were real estate development companies. Dewberry Engineers, Inc. (Engineers) had originally sued Dewberry Group, Inc. (Group), asserting claims for infringement of its registered mark DEWBERRY. This suit ended in a settlement agreement which allowed Group to use its then-existing name DEWBERRY CAPITAL, but not the word DEWBERRY alone. Several years later Group decided to rebrand, going by DEWBERRY GROUP instead of the agreed DEWBERRY CAPITAL and establishing several sub-brands such as DEWBERRY LIVING, DEWBERRY OFFICE, and so on.

Engineers brought suit against Group for breach of the settlement agreement and trademark infringement. The district court entered summary judgment in favor of Engineers on both claims. After a three-day bench trial on damages, the district court awarded $42,975,725 (20% less than the amount requested by Engineers) in disgorgement of profits. The court included profits of Group’s affiliated entities. The court later issued a permanent injunction preventing Group from using the DEWBERRY mark in connection with real estate development services, except as permitted by the settlement agreement. The Fourth Circuit affirmed district court’s rulings in all respects. Circuit Judge A. Marvin Quattlebaum, Jr., dissented from the district’s court’s finding of likelihood of confusion on summary judgment and, even assuming summary judgment were appropriate, Judge Quattebuam would not affirm the award disgorging profits from Group’s nonparty affiliates.

Group filed a petitioned for a writ of certiorari, asking, “Whether an award of the “defendant’s profits” under the Lanham Act, 15 U.S.C. § 1117(a), can include an order for the defendant to disgorge the distinct profits of legally separate non-party corporate affiliates.”

Group argues that the circuit court erred by ignoring the distinction between corporate entities, and points out that Engineers did not bring suit against any of the entities which actually earned profits from the infringement or pursue a piercing of the corporate veil. This created a circuit split because the Ninth and Eleventh Circuits, which have previously held that a veil-piercing must take place before an award of disgorgement of profits could touch profits belonging to affiliated entities. Group also argued that this case was an ideal vehicle for resolving the split and clarifying the scope of a Lanham Act profit disgorgement award because there was no veil-piercing or alternative ground to affirm the award presented below.

Group seeks an order reversing the judgment of the circuit court, which would result in an award of no disgorged profits because Group itself, as opposed to its affiliates, did not have any to disgorge.

The case is Dkt. No. 23-900.

Attorneys: Helgi C. Walker (Gibson, Dunn & Crutcher LLP) for Dewberry Group, Inc.

Companies: Dewberry Group, Inc.; Dewberry Engineers Inc.

News: Trademark